Williams Cos. Inc. (WMB)

[eastunder]

Why Is Williams Companies Suing Energy Transfer Equity?

part 1

http://finance.yahoo.com/news/why-williams-companies-suing-energy-154449123.html

Why Is the ETE-WMB Merger a Controversial Deal?

Williams Companies sued Energy Transfer Equity
Energy Transfer Equity (ETE) and Williams Companies (WMB) are among the most talked about companies in the midstream energy sector since their merger announcement. They were in the news again on April 6, 2016. Williams Companies decided to sue Energy Transfer Equity and its CEO, Kelcy Warren, over a private offering. However, Williams Companies is still committed to completing the merger.

According to Williams Companies, the private offering completed by Energy Transfer Equity in March 2016 was a breach of the merger agreement. It provides “select ETE investors with preferential treatment on ETE distributions.”

According to Williams Companies’ suit, “With full knowledge that ETE may cut its distributions significantly, Mr. Warren designed the Special Offering to ensure that he personally will continue to receive cash distributions at current levels, while other investors in ETE may not.”

Energy Transfer Equity’s private offering

Energy Transfer Equity completed a private offering of 329 million Series A Convertible Preferred Units to certain Energy Transfer Equity common unitholders, including Kelcy Warren, on March 8, 2016. The offerees decided to forgo a portion of their future potential cash distributions on Energy Transfer Equity common units for a period of up to nine fiscal quarters. “The Convertible Units will automatically convert into ETE common units at the end of the plan period.” The forgone distribution will be used to repay proposed debt issuance for the payment of the cash portion of the deal.

Energy Transfer Equity defended itself. It stated that “it has complied, and it intends to continue to comply, with its obligations under the merger agreement with Williams and intends to vigorously defend against the claims made by Williams.”
Stock price reaction

Both, Energy Transfer Equity and Williams Companies stocks rose following the announcement indicating investors’ positive reaction towards the possible deal fall out. Until yesterday, Energy Transfer Equity and Williams Companies fell 71.8% and 64.4%, respectively, since the merger announcement. Energy Transfer Partners (ETP) and Williams Partners (WPZ)—Energy Transfer Equity and Williams Companies’ MLP subsidiaries—lost 27.1% and 45.5% during the same period. Energy Transfer Partners forms 0.12% of the SuperDividend U.S. ETF (DIV